Short‐and long‐run determinants of sovereign debt credit ratings

Afonso, António; Gomes, Pedro; Rother, Philipp

http://hdl.handle.net/10400.5/25660

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Authors

Afonso, António

Gomes, Pedro

Rother, Philipp

Abstract(s)

We study the determinants of sovereign debt ratings from the three main rating agencies, for the period 1995–2005. Using linear and ordered response models, we employ a specification that allows us to distinguish between short- and long-run effects, on a country’s rating, of macroeconomic and fiscal variables. Changes in GDP per capita, GDP growth, government debt, and government balance have a short-run impact on a country’s credit rating, while government effectiveness, external debt, foreign reserves, and default history are important long-run determinants.

Keywords

Credit Ratings Sovereign Debt Rating Agencies Random Effects Ordered Probit

URI

http://hdl.handle.net/10400.5/25660

Citation

Afonso, António; Pedro Gomes and Philipp Rother. (2011). "Short‐and long‐run determinants of sovereign debt credit ratings". International Journal of Finance & Economics, Vol. 16, No. 1: pp. 1-15.